Dull day for precious metals

Prices register modest weekly losses

Precious metals continued with their downward journey on Friday, 07 January 2011 at Comex. Prices fell as the dollar witnessed gains and traders continued to take to profit taking after the holiday season.



On Friday, gold for February delivery fell by $2.8 (0.2%) ending at $1,368.9 an ounce on the New York Mercantile Exchange. Prices were trading higher earlier in the day, but the yellow metal soon pared all its gains. During intra day trading, prices rose to a high of $1,379 and fell to a low of $1,352.7. For the week, gold ended lower by 3.7%.

For the month of December, gold ended higher by 2.5%. It ended the fourth quarter, higher by 8%, its ninth consecutive quarterly gain. Before this, it ended the third quarter higher by 5%. For the second quarter, gold ended up by 12%. For the first quarter of 2010, gold rose by 1.7%. For the year of 2010, gold ended higher by 30%, its tenth consecutive yearly gain.

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa. But bullion metals have registered increase in prices despite strong dollar in recent times and vice versa.

On Friday, December Comex silver futures ended lower by 46 cents (1.6%) at $28.67. Prices lost 7.3% for the week.

Silver prices gained almost 55% in the fourth quarter of this year. For the third quarter, silver gained nearly 18%. For the second quarter, silver ended higher by 3.1%. For the first quarter of this year, silver rose by 3%. In FY 2010, silver ended higher by 83.7%.

In the currency market on Friday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies rose by 0.25%.

The Labor Department in US reported on Friday, 07 January 2011 that the U.S. economy added less-than-expected 103,000 jobs in December, the final month of 2010. It was less than what market had estimated. At the same time, the nation's unemployment rate fell to 9.4% and touched the lowest level in a year and a half. Combined payrolls for November and October were also revised higher by 70,000 jobs. .

The report detailed that of the 14.5 million persons unemployed in December, 44.3% had been jobless for 27 weeks or more. More than 8 million Americans lost their jobs during the height of the recession, which has triggered the longest bout of extended unemployment since World War Two. Nonetheless, the modest increase in jobs last month is one of many signs that the U.S. economy is gradually emerging from its malaise.

In the latest report Barclays Capital on Thursday released its prediction for gold prices in 2011. Gold is to average $1,495 an ounce this year and trade as high as $1,620 an ounce. Barclays expects silver to average $29.10 an ounce this year and trade as high as $36.50 an ounce.

Earlier, HSBC raised its 2011 gold average price forecast to $1,450 an ounce from a previously forecast $1,425 an ounce. The bank sees gold at $1,300 an ounce in 2012, up from $1,275 an ounce earlier. HSBC raised its 2011 average price estimate for silver to $26 an ounce, from $20 an ounce. Silver in 2012 is likely to average $20 an ounce, from $17.50 an ounce.

Bullion metal prices are expected to continue with their joyride in the coming months with gold expected to reach between $1,600 and $1,700 an ounce and silver likely to attempt to test highs in the $50 area.